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Interest Rate Setting by the Fed, the ECB, the Bank of Japan and the Bank of England Compared

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  • Dieter Gerdesmeier

    (European Central Bank, Kaiserstrasse 29, 60311, Frankfurt am Main, Germany)

  • Francesco Mongelli

    (European Central Bank, Kaiserstrasse 29, 60311, Frankfurt am Main, Germany)

  • Barbara Roffia

    (European Central Bank, Kaiserstrasse 29, 60311, Frankfurt am Main, Germany)

Abstract

In this paper we compare the policy responsiveness of the Federal Reserve System, the European Central Bank, the Bank of Japan and the Bank of England. At first glance we find substantial differences in the frequency and amplitude of monetary policy decisions. Differences in the actual implementation of monetary policy are, however, less pronounced when seen through the ‘lenses’ of diverse specifications of monetary policy rules – including a variant of the growth rule and a specification accounting for asymmetric preferences. In fact, all four central banks seem to pursue their respective price stability objective. The observed similarities might be due, inter alia, to the fact that they operate in four of the world's largest and most open economies, and are, therefore, subject to relatively similar domestic but also international economic fundamentals.

Suggested Citation

  • Dieter Gerdesmeier & Francesco Mongelli & Barbara Roffia, 2010. "Interest Rate Setting by the Fed, the ECB, the Bank of Japan and the Bank of England Compared," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 52(4), pages 549-574, December.
  • Handle: RePEc:pal:compes:v:52:y:2010:i:4:p:549-574
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